The Technology Behind The Forex Market – Exploring the Fastest algorithms In The World

Nearly 30 years ago, the foreign exchange (or forex market to you and me) operated far differently to how it does today. Back then, most trades were conducted over the telephone by corporeal brokers, whilst the market was largely inaccessible to everyone apart from institutional investors and seasoned currency experts.

With this in mind, the pace of evolution in this market has certainly been stark, with the emergence of online brokerage platforms like ATFX proving increasingly influential in this change.

In fact, online brokers of this type have made the forex market accessible to a more diverse range of traders, whilst underpinning a space that now sees daily trading volumes in excess of $5.3 trillion. These entities have also proved seminal in the development of modern-day forex trading technology, which enables investors to optimise their own volumes and pursue increased returns.

Introducing Algorithmic Trading – What is This and Why Should You Care?

As forex trading has transitioned online in the digital age and been increasingly channelled through virtual brokers, we’ve also seen the introduction of algorithmic trading.

This is undoubtedly the single most impactful technology currently underpinning forex trading activity across the globe, with algorithms applying a predetermined set of rules and boundaries to scheduled currency trades.

In general terms, traders leverage these customisable algorithms to dictate the price, quantity or timing of individual trades, in a bid to both increase their real-time volumes and optimise their chances of success.

If we delve beyond this broad definition of algorithmic trading, we see that there are four types of trade that fit within this category. The first of these is statistical trading, which uses algorithms to search for profitable forex opportunities based on analysis of historical time series data.

Then there’s auto-hedging, which is an incredibly popular algorithmic trading strategy that generates rules designed to reduce a trader’s exposure to risk. Given the volatile nature of the forex market and its high levels of leverage (which can optimise both profit and loss), this is a key option that has numerous potential benefits.

You can also deploy algorithmic execution strategies to achieve a specific objective (usually pertaining to speed).

This is a viable option for high-frequency or day traders, who look to leverage short-term and real-time market trends to complete a high volume of orders in a relatively short period of time.

The last viable algorithmic trading option provides direct market access to the foreign exchange, which provides optimal speed and lower costs across one or more trading platforms.

This is arguably a less popular option for forex traders, however, as investing in currency is one of the most favourable investment vehicles from the perspective of tax and fees.

The Future of Forex Trading and the Introduction of 5G Technology

There’s no doubt that algorithmic trading is here to stay, whilst the impact of this technology is also being compounded by other innovations.

Take the roll-out of 5G connectivity, for example, which is the latest iteration of cellular network communication technology and will deliver comprehensive Wi-Fi strength connections to mobile traders.

In short, 5G connectivity will provide significantly reduced levels of latency and download speeds that are 20-times faster than the previous iteration, creating a scenario where traders can execute multiple orders more efficiently in real-time when using popular platforms such as the MetaTrader 4 (MT4).

This mobile trading platform has already revolutionised forex trading by connecting time with geographical zones and currency conversions in a live market environment.

However, the emergence of algorithmic trading and 5G connectivity have helped to empower online and mobile traders further, by driving even greater efficiency and making it possible to increase trading activity without compromising on quality.

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